China has instructed its state-owned enterprises to suspend discussions on new projects in Panama and is ramping up inspections on imports like bananas and coffee, in apparent retaliation for the Panamanian Supreme Court's ruling that nullified CK Hutchison Holdings' contract to operate key ports at both ends of the Panama Canal.

Beijing’s response includes advising shipping companies to consider alternative routes for cargo if costs remain low, potentially disrupting trade flows through the canal, where China is the second-largest user. The moves follow the court’s decision to void CK Hutchison’s long-held concession on the Balboa (Pacific) and Cristóbal (Atlantic) terminals, a ruling seen as aligning with former President Donald Trump's efforts to reduce Chinese influence over strategic infrastructure in the Americas.

China had previously warned Panama of repercussions for what it called succumbing to U.S. pressure. CK Hutchison, which has managed the terminals since 1997, is pursuing damages through international arbitration and faces challenges in its plan to sell global port assets to a consortium led by Terminal Investment and BlackRock. Discussions are ongoing about potentially dividing the assets, which could allow Cosco to expand in regions more aligned with China, such as Africa, though a finalized deal might yield less than the expected $19 billion due to the Panama setback.

Chinese customs have specifically increased inspections on imports from Panama, including bananas and coffee, which could affect ongoing trade. Neither the State-owned Assets Supervision and Administration Commission nor the General Administration of Customs has responded to requests for comment. CK Hutchison has also not issued a statement on the matter.

Current Chinese projects in Panama include a $1.4 billion bridge over the canal, China Harbour Engineering’s cruise terminal, and a metro line section by China Railway Tunnel Group. The U.S. remains Panama’s leading trade partner, and the escalation highlights ongoing U.S.-China competition for influence over the canal and Latin American infrastructure.

The development comes after CK Hutchison announced its intent to sell its global port assets, including the Balboa and Cristóbal operations, to a consortium led by Terminal Investment and BlackRock. The Panama ruling has created significant challenges for the divestment and may reduce the transaction’s valuation from the anticipated $19 billion. CK Hutchison is pursuing international arbitration to recover damages stemming from the court decision.